by Radhika Chandrasekhar -

MICROCAPITAL BRIEF: Nigeria Deposit Insurance Corporation (NDIC) Blames Microfinance Institutions (MFIs) for Lending Failures, MFIs Fault “Bad” Nigerian Borrowers

Amidst the turmoil in Nigeria’s microfinance sector, industry players seem to be holding each other responsible for the industry’s failures.

by the MicroCapital Team -

MICROCAPITAL BRIEF: Christmas Withdrawals May Further Stress Nigerian Microfinance Institutions

According to a recent article in Nigeria’s Business Day newspaper, some microfinance institutions (MFIs) are experiencing liquidity squeezes as their customers withdraw cash for the Christmas holiday.

by Hio Kyeng Lee -

MICROCAPITAL BRIEF: Microfinance Banks Want In On Central Bank Of Nigeria’s Proposed Bailout Of Commercial Banks

Commentators are arguing that the Central Bank of Nigeria’s (CBN’s) proposed bank bailout program extend to distressed microfinance banks. The Central Bank of Nigeria is considering the establishment of an asset management company that would buy certain distressed loans from commercial banks at a discount with the goal of providing greater liquidity in the banking sector.  This program would not extend in its current iteration to microfinance banks because only loans with identifiable collateral are eligible.  Mr. Akin Oladeji, Managing Director of a local investment bank, opposes the call to bailout distressed microfinance banks because they operate in the informal sector and therefore are not fully integrated into Nigeria’s financial markets.  Rather, he states that a separate government agency should be created to supervise and provide assistance to ailing microfinance banks.

by Hio Kyeng Lee -

MICROCAPITAL.ORG BRIEF: Nigerian Microfinance Banks Pledge to Form Single Organization in Response to Supervision Crisis

Two Nigerian microfinance trade associations, the National Association of Microfinance Banks (NAMFBIN) and Association of Microfinance Bank in Nigeria (AMBN), have pledged to form the single organization titled, the National Association of Microfinance Banks (NAMB).  Under the supervision of the Central Bank of Nigeria (CBN), NAMB would become the only authorized organization to represent microfinance institutions.  Currently, Nigerian regulators have been overwelmed by the large number of microfinance institutions operating in the country and the microfinance banking industry has been in turmoil. By forming a single microfinance trade association, the hope is to promote greater adherence by members to a common set of business practices and to lessen the regulatory burden on the state thereby restoring confidence in the industry as a whole.

by Radhika Chandrasekhar -

MICROCAPITAL.ORG STORY: The Nigeria Deposit Insurance Corporation (NDIC) “Overwhelmed” by Microfinance Responsibilities

A recent article from Next.com, [1] an online source for Nigerian news, reported that the Nigeria Deposit Insurance Corporation (NDIC), the financial industry regulator and subsidiary of the Central Bank of Nigeria (CBN), is unable to regulate and keep up with the rapidly expanding microfinance sector in the country. [2] At a workshop for finance correspondents in Kaduna, Nigeria, [2] [4] Jacob Afolabi, a deputy director at the NDIC, stated that the NDIC and the CBN are “overwhelmed by the number of microfinance banks in the country.” [2]

by Christopher Maggio -

MICROFINANCE PAPER WRAP-UP: Strategies for Effective Loan Delivery to Small-Scale Enterprises in Rural Nigeria, by Benjamin Okpukpara

Written by Benjamin Okpukpara, published in the Journal of Development and Agricultural Economics Vol. 1(2), pp. 041-048, May, 2009, housed at Academic Journals.org, 8 pages, available at:
http://www.academicjournals.org/JDAE/PDF/Pdf2009/May/Okpukpara.pdf

This work studies the determinants of micro business loan acquisition for rural entrepreneurs in Nigeria. In Nigeria, only 35 percent of the “economically active” population has access to formal credit [1]. In order to increase access to formal credit to rural areas, the government has enacted various microcredit programs specifically targeting the rural poor. However, according to the author, most of these programs have fallen short of their goals due to “poor targeting” and a “lack of organized ways of administering loan to the rural enterprises” [2,4]. Therefore, this study attempts to ascertain which strategies can overcome the problem of low access to microfinance services.

by Stefanie Rubin -

MICROCAPITAL.ORG STORY: Nigerian MFI, Integrated Micro Finance Bank Plc (IMFB), Temporarily Closes Doors Due to Lack of Liquidity

The Central Bank of Nigeria (CBN) has granted permission to Integrated Micro Finance Bank Plc (IMFB) to temporarily shut its doors due to a lack of short-term liquidity [1].  The announcement comes shortly after the unexpected resignation of IMFB Chief Executive, Mr. Simon Akinteye.  According to Mr. Femi Fabamwo, Deputy Director of the Other Financial Institutions Department of the CBN, the short-term liquidity problems of IMFB were intensified when huge numbers of enraged customers demanded their money back.  Lacking sufficient financial resources to meet depositors´ requests, IMFB appealed to the CBN, which has allowed it until next month to reopen.

by Chinq Yee Chong -

MICROCAPITAL.ORG STORY: Nigerian Central Bank Warns Of Increase In Non-Performing Microfinance Loans, Poor Corporate Governance And Commits To Impose Sanctions On Errant Officials At Microfinance Banks

In a recent report on the Nigerian news portal, Business Day Online [1], entitled ‘CBN to sanction erring directors of microfinance, mortgage banks’ [2], it was reported by Hope Moses-Ashike that the Central Bank of Nigeria (CBN) [3] has threatened to dismiss and prosecute senior officers and operators at microfinance institutions and primary mortgage banks who have been found to have engaged in malpractice. CBN officials expressed displeasure over improper conduct by chairmen, directors, senior management staff and auditors at microfinance institutions and other financial institutions in the country. They warned the operators from Lagos, Ondo, Ogun, Osun, Edo, Ekiti, Oyo and Kwara who attended a weekend meeting for financial institutions in Lagos that the Nigerian police and the Economic and Financial Crimes Commission (EFCC) [4] will be invited to intervene anytime any indication of malpractice is discovered.

by Bharathi Ram -

MICROCAPITAL STORY: PS Microfinance Bank in Nigeria Exposed as Unlicensed and Fake, Bank Closes Operations Abruptly, Several Depositors Lose Huge Amounts of Money

Nigeria based PS Microfinance Bank Limited has closed operations abruptly, leading to heavy financial loses for several of its depositors, as per a press release on The Guardian – Nigeria. According to the release, the bank collected money from ‘almost every trader’ in the Akute area in Nigeria with the promise of providing attractive loans. Following the collection of money, the bank officials are said to have closed down not only their rental office in the Akute region but also their head office in the Ogba region of Nigeria. Officials of the bank have reportedly ‘gone into hiding’ and have been unreachable to both their clients and the press. As stated, the victims of the bank’s fraudulent activities are mostly traders including several women and the total loss for the depositors is estimated to be in the range of millions of Naira; an exact figure of the total amount defrauded by the bank is not currently available. Presently, PS Microfinance Bank does not maintain a web presence nor does it appear to report to MIX, the microfinance information clearinghouse; it is however unclear if a website was in fact existent for the bank prior to its closure.

by Goda Thangada -

MICROCAPITAL STORY: Peace Microfinance Bank of Nigeria Seeks License To Operate State Microfinance Bank

Peace Microfinance Bank of Nigeria is still seeking licensing from the Central Bank of Nigeria (CBN) to become a state microfinance bank. In preparation, Peace raised USD 6.75 million (Naira 1 billion) in share capital by December 2008. According to the Microfinance Policy, Regulatory and Supervisory Framework for Nigeria, this is the minimum paid-up capital necessary for a state microfinance bank. Furthermore, a state bank must operate in two-thirds of the local government areas in the state of operations. These requirements are part of 2005 reforms in Nigeria’s microfinance sector, further discussed in this MicroCapital story. Currently, Peace operates primarily in the Federal Capital Territory (FCT) of Nigeria, a small area in the center of the country that includes the capital city of Abuja. Presumably, this is the area in which Peace intends to operate as a state bank.

by Chinq Yee Chong -

MICROCAPITAL STORY: Islamic Microfinance – What Next? Nigeria Promotes “Non-Interest” Banking

In a recent speech before the senate, Lamido Sanusi who is the governor of the Nigerian Central Bank (CBN) governor, emphasized that it is important to ensure that banks do not claim to offer Islamic banking products when they are in fact running a conventional banking business.

by Goda Thangada -

MICROCAPITAL STORY: Microfinance Interbank Money Market Commences in Nigeria

The Microfinance Money Market Association of Nigeria (MMMAN) was inaugurated in Lagos in March 2009. MicroCapital previously reported on the announcement of the proposed interbank money market in September 2008. The MMMAN was developed by the Financial Derivatives Company (FDC), an asset management company, and the Kakawa Discount House to allow microfinance banks (MFBs) to borrow and invest excess liquidity amongst one another. Financial Vanguard reports that five MFBs, the Integrated MFB, Mic MFB, Accion MFB, Susu MFB and Gapbridge MFB, have officially joined MMMAN. These MFBs have also been trading amongst one another since October to pilot the system. Mr. Jaiyeola Laoye, Managing Director and CEO of Kakawa, said at the inauguration, “The market is for short and medium term liquidity and would help [the MFBs] carry out their functions more effectively.” Also speaking at the inauguration, FDC’s Managing Director Bismarck Rewane, added “Most times, banks get closed down when they are faced with liquidity problems than when they encounter solvency challenges.” The MMMAN is designed to bring stability to the microfinance industry by providing further sources of liquidity to MFBs and to mobilize liquid funds between MFBs at competitive rates.